Support

A cookie is a piece of data stored by your browser or device that helps websites like this one recognize return visitors. We use cookies to give you the best experience on BNA.com. Some cookies are also necessary for the technical operation of our website. If you continue browsing, you agree to this site’s use of cookies.

On July 6, 2012, President Obama signed the Moving Ahead for Progress in the 21st Century Act (P.L. 112-141), which makes significant changes in pension law, including pension funding stabilization provisions and substantial increases to PBGC premiums over the next several years.

For plan years beginning after December 31, 2011, employers can temporarily use higher interest rates to calculate liabilities under their single-employer defined benefit pension plans, which will result in smaller minimum-funding contributions in the short-term. The pension funding stabilization provisions attempt to address employers' concerns that historically low interest rates have resulted in higher minimum-funding contributions during a weak economic climate.

The Act's interest rate provisions apply automatically to defined benefit pension plans that use segment rates rather than the corporate bond yield curve to calculate their funding requirements. Employers may elect to opt out or postpone the application of these interest rate provisions. These changes will have no effect on the calculation of pension liabilities on employers' financial statements.

The Act also increases the current $35-per-participant PBGC flat-rate premium to $42 per participant in 2013 and to $49 per participant in 2014. The current variable-rate premium of $9 per $1,000 of unfunded vested benefits (UVB) will increase to $13 per $1,000 of UVB in 2014 and to $18 per $1,000 of UVB for 2015. PBGC premiums will continue to be calculated using prior law interest rates.

Employers should consider how the Act's provisions will affect their minimum-funding contributions, PBGC premiums, and any current funding-based benefit restrictions before making any decisions. Although employers who choose to apply the new interest rates will have smaller minimum funding contributions for the next several years, contributing less to defined benefit pension plans can create other issues, such as higher PBGC variable rate premiums and significantly higher minimum funding contributions in future years.

Additionally, employers should consider how these changes may impact employee communications and funding and investment strategies. For example, employers that take advantage of the new interest rate provisions must include additional disclosures in their plans' annual funding notices, which must be provided to participants no later than 120 days after the end of each plan year.

For more information, in the Tax Management Portfolios, see Kushner, 361 T.M., Reporting and Disclosure Under ERISA, and in Tax Practice Series, see ¶5570, Reporting and Disclosure Requirements for Benefit Plans.

All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to books@bna.com.

Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)

Notify me when updates are available (No standing order will be created).

This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to research@bna.com.

Put me on standing order

Notify me when new releases are available (no standing order will be created)